Facebook shares hit new low as growth rate cools

LOSING STEAM:The leading social network’s revenue, operating profit and number of users rose, but reserves that were set aside for stock grants cut into its bottom line

AFP, NEW YORK

A signpost at Facebook’s new corporate headquarters in Menlo Park, California, is pictured on Jan. 31.

Photo: EPA

Facebook shares on Thursday sank to a new low after the world’s leading social network reported a loss of US$157 million in its first earnings after its public offering.

The financial results were largely in line with expectations and were dragged down by reserves set aside for stock grants, but investors were evidently spooked by signs that the social network’s blistering growth rate is cooling.

Facebook shares plunged more than 11 percent to US$23.80 in after-hours trade after the news, which came a day after key Facebook partner Zynga reported disappointing earnings, dampening enthusiasm about social media.

Facebook, which made a market splash in May, said that excluding special items, its results for the second quarter showed a profit of US$0.12 a share, in line with most forecasts, as revenue rose to US$1.18 billion, a bit above market estimates.

The results showed growth for Facebook in overall revenue, operating profit and the number of users — which grew to 955 million by the end of the quarter.

Revenue for the second quarter totaled US$1.18 billion, an increase of 32 percent from the same period a year ago.

Advertising revenue — 84 percent of the total — was US$992 million, up 28 percent.

Excluding share-based compensation and related expenses, profits from operations for the second quarter were US$515 million, compared with US$477 million for the second quarter of last year.

In the release, Facebook said its monthly active users rose to 955 million as of June 30, an increase of 29 percent from a year ago.

The rate that Facebook has been adding monthly and daily active users has slowed steadily from this time two years ago, when the numbers were more than doubling.

Facebook founder and chief executive Mark Zuckerberg offered no comment on the financial results, but repeated the company’s mantra.

“Our goal is to help every person stay connected and every product they use be a great social experience,” he said in a statement.

“That’s why we’re so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends,” he said.

However, Global Equities Research analyst Trip Chowdhry said the results confirmed his pessimistic outlook for Facebook.

“Facebook is an unproven company, with unproven concepts, along with mediocre management,” he said in a note, calling the company “overhyped and under-delivered.”

Facebook shares have been in a funk since their much-hyped May 18 debut was plagued by technical glitches and complaints that key forecasts were kept from the public in what was the largest initial public offering for a tech firm.

Shares have fallen steadily since the public offering at US$38.

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